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Acquisition Of Companies And Brands - Fmcg Sector

Posted by Nitin Kochhar on 4/26/2006 at 5:54 AM ET 300 Points

Hi,

We have seen Mergers and Acquisition in FMCG sector as well as acquisition of lot individual brands. Here are few examples:

1. P&G and Gillette
2. Dabur acquired Balsara for 143 crores
3. Godrej Consumer Care bought Keyline Brands
4. Marico acquired HLL Nihar brand

I have done some research on this topic. I want the following inputs:

a) Rationale for companies going for acquistions (strategy)
b) Please give more examples of acquisition of companies and brands
c) Do you forsee any future acquisitions in FMCG globally or in India? If yes, what is the rationale behind this?

Any type of help will be useful.

Thanks and Regards,
Nitin Kochhar

Posted by woutkok on 4/26/2006 at 6:11 AM Accepted

Hi,

Mergers and acquisitions have many different reasons
which are relevant in the making of strategies

some are:

Product related:

Diversification of existing product group
complementing current product group
Increasing products on offer

Size related:

Gain of market share by eliminating competition
Gain of revenue by accuiring revenue making company
The presence of the company on the world map (Hilton Inc. Merger with Hilton Int.)

Technology related:

One company making certain goods that could help in the future the other main company.

Economics related (cost related)

Production plants acquisisiton in low cost countries (labor)

Distribution channels

Companies aquiring distribution channels (look at Wall Mart)

We will se ALOT of M&A activity in this world economy due to globalisation and DEFINITELLY in emerging markets like China and India.

Follow the headlines on Reuters.com technology report and investment watch, there is constant talks about M&A.

Also look into:

http://news.moneycentral.msn.com/category/topics.asp?iSub=1&Topic=TOPIC_MER...

http://www.washingtontechnology.com/mergers/

http://www.aon.com/risk_management/mergers_acquisitions.jsp

Hope this helps,

W
Posted by Nitin Kochhar on 4/26/2006 at 6:23 AM Author

Thanks woutkok,

Thanks a lot. But can you please give inputs specific to FMCG sector and examples of past acuisitions and reasons behind that.
Also please dont restraint your answers only to M&A of companies - you can give examples of aquisition of individual brands as mentioned in the question.
Posted by nahida.sunil on 4/26/2006 at 7:14 AM Member

Hi Nitin

This may be a little outdated (2005), but see if it is useful to you

Foods & FMCG
(27 deals totalling Rs 34.2 billion, $786 million)

The deal activity in the sector was dominated by the spirits sub-sector, mainly due to exit sales by the Jumbo Group to the UB Group and SAB Miller, deals that the market has been expecting for the last 10 years.

Vijay Mallya's United Breweries Group (through Group entities Mc Dowell & Co, Phipson Distillery, United Spirits and United Breweries Holdings) acquired a controlling stake in the Jumbo Group's Shaw Wallace & Company for a total deal value of Rs 16.2 billion ($371.6 million). The deal is made up of an acquisition of a 50 per cent stake from the promoters (including a non-compete premium) a tender offer for an additional 25 per cent from other shareholders, and the acquisition of two distribution subsidiaries.

The other Jumbo Group company to be sold was Shaw Wallace Breweries. SAB Miller increased its stake by 50 percentage points to 99 per cent in the company through its Indian subsidiary, Mysore Breweries. The stake was held by Shaw Wallace & Company and, hence, had SAB Miller not undertaken this acquisition, Shaw Wallace Breweries would effectively have been an joint venture between two rivals — UB and SAB Miller.

McLeod Russell India (part of the B. M. Khaitan Group) acquired a 90 per cent stake in Williamson Tea Assam for Rs 2.1 billion ($48.2 million). Of this, a 70 per cent stake came through the acquisition of holding company Borelli Tea Holdings from Williamson Tea of UK, while the rest is to be acquired by a tender offer to other shareholders.

Good Luck

Nahida
Posted by nahida.sunil on 4/26/2006 at 7:22 AM Accepted

Hi again,

Here's more:

HLL's mergers with TOMCO, Lakme, Brook Bond Lipton India, Pond's India.

HLL's acquisitions: Kissan, Kwality Icecreams and Modern Foods.

Regards

Nahida
Posted by Nitin Kochhar on 4/26/2006 at 10:20 AM Author

Thanks everyone ... you really have given wonderful inputs. Keep post if you recall more examples or any other points related to the question.
Posted by Nitin Kochhar on 5/19/2006 at 6:34 AM Author

Check out one of published article on this topic - "The FMCG sector: Companies and brand acquisitions"

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